Despite being next-door neighbors separated by just a narrow 21-kilometer stretch across India’s Siliguri Corridor, famously called the “chicken’s neck” which Aman Pant, a Senior Fellow at Nepal Economic Forum (NEF), aptly compares to running a half marathon to reach Bangladesh, Nepal and Bangladesh continue to be surprisingly unfamiliar with one another. For many Nepalis, Bangladesh is often reduced to medical college, garments, traffic, and floods. Similarly, for many Bangladeshis, Nepal is only Everest, trekking, Buddha, and earthquake. The two nations share a common pattern of a young population, aspirational middle classes, a passion for cricket and enduring legacies of medical student exchanges and academic ties. The relationship between Nepal and Bangladesh requires more attention and exploration because both countries face the twin challenges of diversifying their economies and graduating from the Least Developed Country (LDC) status by 2026. In today’s increasingly disordered world, bilateralism and regional integration have become ever more necessary and important.
The trade relationship between Nepal and Bangladesh shows great promise but remains minimal. Nepal’s exports to Bangladesh peaked at USD 66.5 million in 2008[1] but have since declined, reaching barely USD 3.3 million in 2023/24[2] — a drop of nearly 20% from the previous year. The import data shows a similar pattern with USD 27.7 million[3] in the same year representing a 36% decrease. Geographic proximity between the two has failed to translate into a tangible trade relationship.
In recent years, energy cooperation appears as a promising opportunity backed by the trilateral agreement between Nepal, India, and Bangladesh. Nepal exported its first 40 MW of electricity to Bangladesh in 2023 and has plans to expand the agreement for an additional 40 MW.[4] Bangladesh needs clean power to green its readymade garments sector because of its large demand, and Nepal has surplus hydro during the wet season, which makes it seem like a perfect match. The concept of “green garments,” which refers to Bangladeshi clothing produced through Nepali hydroelectric power, has been proposed as a potential branding strategy for both nations. The situation in goods trade appears more concerning than in other areas. The export prospects of black cardamom, yarn, and lentils, which were once promising products for Nepal, have vanished from the export basket of Nepal. The combination of high tariffs and complicated procedures and special treatment for Bhutan’s similar products have reduced Nepal’s competitive edge, which has resulted in a weak export of these products, which is highly sensitive to market changes.
The symbolic agreements fail to resolve the core structural issues which persist in the system. The ongoing Free Trade Agreement (FTA) negotiations between the two nations are engulfed in its own complexities, as any tariff concession to Bangladesh automatically extends to India under the India-Nepal Trade Treaty. The situation creates a genuine challenge because preferences designed for Bangladesh might end up providing undue advantages to India. This situation should play down our expectations regarding the FTA, and we should work on establishing sectoral partnerships that avoid these structural barriers.
Looking Beyond the Traditional Sectors
Unlocking bilateral trade between Nepal and Bangladesh needs to be explored through newer and more resilient areas of complementarity instead of awaiting the results of a FTA that is caught up in complexities and seeks to expand a traditional export basket with limited opportunities for enhanced trade.
Tourism: Adventure, Wellness, and Youth Appeal. Bangladesh contributes significantly to tourist arrivals in Nepal, but the potential is much larger. With a youthful and aspirational population and growing interest in adventure travel, nightlife, and wellness getaways, Nepal can be a premier destination for Bangladeshi tourists. Similarly, in the tourism sector of Bangladesh that continues to expand, Nepalis can choose to visit Sunderbans, Cox’s Bazar, and St. Martin’s Island, showing the potential for two-way tourism.
The current flight schedule includes around 12 weekly direct flights between Dhaka and Kathmandu, which serves as the main entry point because road travel remains limited for Bangladeshi visitors. The air connectivity should be utilized through improved packages and competitive fares and bundled travel experiences to make tourism a powerful force for strengthening bilateral relations.
Information Technology and Digital Services. The IT sector is another area which demonstrates strong potential for future growth. The Government of Nepal has prioritized and designated 2024–34 as its “IT Decade” to achieve export targets of USD 25 billion.[5] The financial sector of Bangladesh operates with energy yet it has not achieved complete digital transformation. Collaborations like the recent Filps partnership with Bangladeshi banks illustrate how firms promoted by Nepalis can provide agility and global connections while Bangladesh offers scale and a large domestic market.
The digital platforms operating in Bangladesh, including Daraz for e-commerce and Pathao for ride-sharing and logistics, demonstrate how consumer-facing apps can facilitate cross-border trade and services. If Nepali IT companies engage with these platforms to enter Bangladesh’s market by implementing backend solutions and digital payment integration and developing cross-border services, they could leverage Bangladesh’s scale while creating regional pathways for growth.
The collaborative work between Nepal and Bangladesh shows how the two nations can build their digital economies through expanded digital market access for regional entrepreneurs.
Processed Foods and Pickles. Nepali companies have already started exporting their products such as noodles, snacks, and pickles to foreign markets with Wai Wai going global and Yashoda Foods entering the border towns of India and Bhutan. Research shows Nepali products will succeed in the market when supply chains and branding strategies are properly aligned. The growing pickle industry in Nepal shows potential to enter the urban market of Bangladesh. Furthermore, the introduction of halal-certified dry meat and processed meat products to Bangladesh is possible because these products already have export markets in Gulf countries where halal certification is mandatory for consumers.
Cosmetics and Lifestyle Products. The Nepali cosmetics and herbal products market which use ayurvedic and natural ingredients show promise for expansion into Bangladesh’s increasing middle-income population. Organic and natural brand popularity among consumers creates a chance for Nepali products to differentiate themselves from standard imported goods. The emerging lifestyle industry, if paired with branding around purity and authenticity, could find significant uptake among young Bangladeshi consumers.
Hospitality Services and Gastronomy. Hospitality services are also emerging as vibrant connectors. The upscale neighborhoods of Dhaka including Baridhara, Banani, and Gulshan experience growing demand for high-end dining and lifestyle services from both the affluent local middle class and expatriate communities. This creates space for Nepali restaurant ventures, hotel chains, and service businesses like Himalayan Java, Dalle, and Jimbu Thakali to establish themselves not as casual eateries but in the upscale dining and lifestyle segment.
Bridging Beyond the FTA
If Nepal-Bangladesh relations are to evolve into a more trade-driven and true economic partnership, both sides must act with pragmatism. The FTA negotiations encounter regional obstacles, but Nepal maintains access to current sectoral market opportunities in hydropower, IT, food processing, tourism, and education. The improvement of logistics and connectivity stands as equally important because trading through Banglabandha and Mongla continues to be expensive and impractical even after transit agreements were established thereby requiring immediate action to optimize customs procedures for SMEs. The Bangladesh, Bhutan, India, Nepal (BBIN) and Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) regional frameworks serve as testing grounds for cross-border energy grid projects as well as the development of digital payment systems and tourism routes. The integration process does not need to rely solely on tariff schedules because entrepreneurs and consumers, along with shared aspirations, can drive it. Both countries share a dual connection to their historical past and their potential for development because they currently face identical challenges in their quest to leave the LDC category behind. The trade statistics indicate poor performance, but the will to diversify and deepen ties is common. As neighbors who have too often looked past each other, this is the moment to look across — beyond the chicken’s neck, beyond the narrow baskets of lentils and textiles — and start creating a new partnership.
Sudip Bhaju is a private sector development expert with 15+ years of experience driving market-led transformations across South Asia and Rwanda. He also serves as the Director at Nepal Economic Forum.
